Paying off debt is good advice if you want to buy a house. So is saving for a down payment. The question is, which one is most important? Many times, the answer is both.
High debt loads can cause you to need a costly mortgage bad credit loan, while a paltry down payment can knock you out of getting approved for a mortgage altogether.
You may think, “How can I save and pay down my debt at the same time?” Well, it’s not easy, but it’s also not impossible.
Here are some helpful tips for saving money AND paying off debt at the same time.
Pinpoint Defined Goals
Add up your debt load and look at your savings account. Then go to a lender’s website and use their calculators to see how much of a down payment you’ll need. Write the amount you need to pay down debt and the amount you need to save for a down payment. This is your goal.
Cut Out Unnecessary Expenses
Now tackle your budget. Write down where you spend your money, and start crossing stuff off the list. Are there items you pay for and don’t use, like a gym membership? Get rid of them and move those payments to your “pay off debt” line item. Then start chopping monthly plans like cell phones and cable. Finally, reduce the amount you spend eating out, buying new clothes, going to concerts, and vacationing. Put all of that money into your “pay off debt” list.
Make Saving Easy
Set your bank account to transfer a set sum to your savings account every paycheck. That way you don’t have to remember to do it, and you won’t have a chance to spend it.
Increase Your Income
Adding more monthly income is one of the easiest ways to pay down debt and ramp up your savings. Get a weekend job, mow yards, babysit, dog-sit, house-sit, freelance, or find another way to add to your income. Stash every dollar of extra money in savings or pay it on your debt.
Have a Yard Sale
Get rid of clutter and make some fast cash with a yard sale. Put up big signs, advertise on social media, and watch the stuff you no longer wear or use disappear. Take your proceeds straight to the bank and put in savings.
Store coupons are easy to use. Just download the app, clip the coupons, and scan your smart device at checkout. If you get in the habit of doing this, you can save on all kinds of necessities. Once you check out, immediately transfer your savings to your down payment fund.
Debt Free = Faster Savings
Once you get your debt paid off, double down on saving with the money previously earmarked for your monthly payments.
Saving for a down payment and paying off debt at the same time takes discipline and determination. If you feel yourself falter, remind yourself your end goal is buying a home and that the sacrifice is worth it.